Publication:
Adverse selection costs, trading activity and price discovery in the NYSE: An empirical analysis

Loading...
Thumbnail Image
Identifiers
Publication date
2004
Defense date
Advisors
Tutors
Journal Title
Journal ISSN
Volume Title
Publisher
Elsevier
Impact
Google Scholar
Export
Research Projects
Organizational Units
Journal Issue
Abstract
This paper studies the role that trading activity plays in the price discovery process of a NYSE-listed stock. We measure the expected information content of each trade by estimating its permanent price impact. It depends on observable trade features and market conditions. We also estimate the time required for quotes to incorporate all the information content of a particular trade. Our results show that price discovery is faster after risky trades and also at the extreme intervals of the session. The quote adjustment to trade-related shocks is progressive and this causes risk persistency and unusual short-term market conditions.
Description
Keywords
Microstructure, Adverse selection costs, Trade-related information, High-frequency data
Bibliographic citation
Journal of Banking and Finance, 2004, vol. 28, nº 1, p. 107-128